NEWS ANALYSIS; In Crisis With Japan, China Adjusts Strategy but Does Not Back Down

By JANE PERLEZ; Bree Feng contributed research.

Published: September 30, 2012

China has reined them in and turned instead to hard-edged diplomacy over disputed islands in the East China Sea to lessen any potential damage the conflict might have inflicted on the nation's softening economy and a delicate leadership transition.

With relations between the two Asian powers at a low point, China decided to go ahead with a scaled-back reception here on Thursday night to honor the 40th anniversary of the resumption of their diplomatic ties on Sept. 29, 1972. A member of the Politburo's Standing Committee, Jia Qinglin, attended with several other Chinese officials.">

BEIJING -- After allowing anti-Japanese demonstrations that threatened to spin out of control, China has reined them in and turned instead to hard-edged diplomacy over disputed islands in the East China Sea to lessen any potential damage the conflict might have inflicted on the nation's softening economy and a delicate leadership transition.

With relations between the two Asian powers at a low point, China decided to go ahead with a scaled-back reception here on Thursday night to honor the 40th anniversary of the resumption of their diplomatic ties on Sept. 29, 1972. A member of the Politburo's Standing Committee, Jia Qinglin, attended with several other Chinese officials.

But Beijing sent a not-so-subtle message to Tokyo by not granting clearance to the plane that would have brought in an important Japanese guest, the chairman of Toyota. Other Japanese attended the event, though, and at the United Nations in New York, the two sides met in private and sparred in public.

Around the disputed islands in the East China Sea, called the Diaoyu by the Chinese and the Senkaku by the Japanese, a large flotilla of Chinese patrol boats was being monitored Friday by about half of Japan's fleet of coast guard cutters, the Japanese newspaper Asahi Shimbun reported.

The protests in more than 80 cities, including in urban centers where Japanese car dealerships and electronics plants were damaged, suggested that the Chinese leadership approved the outpouring of nationalism in part as insulation against criticism of the party itself during the transition of power that formally is scheduled to take place at the 18th Communist Party Congress, now set to begin on Nov. 8. But the protests threatened to turn against the Chinese government itself, diplomats and analysts said.

Even though China has overtaken Japan as the biggest economy in Asia, Beijing's handling of the dispute, precipitated by the Japanese government's decision to buy three of the islands from their private Japanese owners, highlighted the interdependence of the Chinese and Japanese economies, and the limitations on what the leadership could allow.

Notions of punishing Tokyo economically for buying the islands, whose status was left unclear after World War II, are unrealistic, said Hu Shuli, editor in chief of Caixin Media and one of China's chief economic journalists. So many Chinese workers are employed at Japanese-owned companies, she said, that any escalation of tensions leading to a boycott of Japanese goods could lead to huge job losses.

This would be disastrous in an already shaky Chinese economy, Ms. Hu wrote in the Chinese magazine Century Weekly.

At a time when overall foreign investment in China is shrinking, Japan's investment in China rose by 16 percent last year, Ms. Hu noted. The Japan External Trade Organization reported $12.6 billion of Japanese investment in China last year, compared with $14.7 billion in the United States.

Not just China, but all of Asia, could face a serious economic downturn if Japanese investments in China were threatened, said Piao Guangji, a researcher at the China Academy of Social Sciences.

Exactly how the anti-Japanese protests were organized, and by whom, remained murky.

A rough chronology showed that immediately after the Japanese government announced it had bought the islands, protests began in Beijing and other cities. The protests then spread, reaching a peak on the anniversary of the Sept. 18, 1931, Mukden Incident, which led to the Japanese invasion of Manchuria. After that, the protests were shut down.

It appeared that permission for the weeklong protests had been discussed at very high levels, said one foreign diplomat who had followed the events closely.

Analysts said the protests might have been used as a weapon by one party faction against another as part of the internal machinations over who would win positions on the Standing Committee, but precisely how those possibilities played out, if at all, was not clear.

Bold color photographs on the front pages of state-run newspapers, particularly of the protests outside the Japanese Embassy in Beijing, were evidence that senior leaders approved of the demonstrations, and suggested that, in some respects, they were even organized by the government, diplomats said.

Photographs of protests are rarely seen in the state-run news media, they noted. By running them, the government sent a message to the Chinese people that joining the demonstrations was acceptable, said a foreign diplomat, who spoke on condition of anonymity in keeping with protocol.

Municipal workers in Beijing who normally guard local neighborhoods were called by their superiors at 4 a.m. on the day of one of the protests, directed to board buses that took them to the protest site outside the Japanese Embassy and provided with box lunches, one of the workers said. Their job was to provide security, alongside the police.

As the demonstrations grew in intensity, there were increasing signs that they might get out of control. Several protesters in Beijing carried signs saying ''Diaoyu belongs to China, Bo belongs to the people.'' That was a reference to Bo Xilai, the disgraced former Communist Party boss of the western city of Chongqing, who had developed a populist following before he fell from power this year after his wife was accused of murdering a British business associate.

Those signs were quietly removed from the hands of the protesters by plainclothes security men stationed around the crowd, said a person who watched one of the protests outside the Japanese Embassy.

A few placards bearing portraits of the late Chinese leader Mao Zedong stood out among the Chinese flags carried by most of the demonstrators. A protester in the southern city of Shenzhen was heard on television shouting, ''Down with Communism!''

The end of the protests, however, did not mean the end of the fury against Japan.

At a meeting in Beijing this month, Western academics were taken aback by the depth of hostility toward Japan among Chinese foreign policy experts.

There was talk of ''conflict'' to teach Japan a lesson, said John DeLury, an assistant professor at Yonsei University Graduate School of International Studies in Seoul, for making what the Chinese see as an unacceptable grab of territory that historically has belonged to them.

With the new leadership in Beijing set to assume full control soon, even as Japan may turn to a conservative Liberal Democratic government under the more hawkish Shinzo Abe in elections next year, a reduction in tensions looks remote, said Ren Xiao, a former Chinese diplomat who served at the Chinese Embassy in Tokyo.

''I think it will be less likely for the new Chinese leadership to make concessions,'' said Mr. Ren, now a professor of international politics at Fudan University in Shanghai. ''The same goes for a possible Liberal Democratic Party government in Japan. That's why I am very worried about the Sino-Japanese relationship.''

This is a more complete version of the story than the one that appeared in print.

China has reined them in and turned instead to hard-edged diplomacy over disputed islands in the East China Sea to lessen any potential damage the conflict might have inflicted on the nation's softening economy and a delicate leadership transition.

With relations between the two Asian powers at a low point, China decided to go ahead with a scaled-back reception here on Thursday night to honor the 40th anniversary of the resumption of their diplomatic ties on Sept. 29, 1972. A member of the Politburo's Standing Committee, Jia Qinglin, attended with several other Chinese officials.">